5 Resources to Help You Make Sense of Your Three-Digit Number

Your FICO Score, more commonly referred to as your credit score, can determine many things in your life so it’s imperative you understand what those three-digit numbers mean and how to maintain a good one. If you haven’t checked your score lately, you can be sure someone else has. Every time you receive a credit card offer in the mail or apply for a mortgage or loan, someone has accessed your three-digit number.

Everyone of a legal age should know how to check their score, and fortunately with the tools available today it’s relatively easy; all you need is a computer and internet access. Since it can be hard to understand exactly what these numbers mean for you and your future, we put together 5 online resources to help you make sense of it all.

How Your Score Is Determined

To get a better understanding of how your credit score is determined and what influences that score, take a look at the breakdown below, provided by The New York Times.

35 Percent- is determined by your payment history. Do you regularly pay your bills or fines on time to any creditor that submits your information to the credit bureau? Even unpaid library fines, medical bills or parking tickets may appear here.

30 Percent- is based on the amounts you owe each of your creditors, and how that compares with the total credit available to you or the total loan amount you took out. If you’re maxing out your credit cards, your score may suffer.

15 Percent- is based on the length of your credit history, both how long you’ve had each account and how long it’s been since you had any activity on those accounts. The fewer and older the accounts, the better (assuming you’ve made timely payments).

10 Percent- is based on how many accounts you’ve recently opened compared with the total number of your accounts, as well as the number of recent inquiries on your report made by lenders to whom you’ve applied for credit. Your score can drop if it looks as if you’re seeking several new sources of credit — a sign that you may be in financial trouble. (If a lender initiates an inquiry about your credit report without your knowledge, though, it should not affect your score.) Shopping around for an auto loan or mortgage shouldn’t hurt, if you keep your search to six weeks or less. But every inquiry you trigger when you apply for a credit card can affect your score, says Craig Watts, a spokesman for Fair Isaac. So be selective.

The Final 10 Percent- is determined by the types of credit used. Having installment debt — like a mortgage, in which you pay a fixed amount each month — demonstrates that you can manage a large loan. But how you handle revolving debt, like credit cards, tends to carry more weight since it’s seen as more predictive of future behavior. (You can pay off the balance each month or just the minimum, for example; charge to the limit of your cards or rarely use them.)

Conclusion

Whether you have amazing credit or not-so-good credit, it’s still important for you to monitor your credit score on a regular basis. This is also true for individuals who are planning to apply for any type of loan or credit card in the near future. By taking advantage of your free credit report and using one of the many online tools to check your credit score, you can identify how creditworthy you are as well as spot and edit any errors before applying. Being proactive and vigilant in how you handle your credit can make all the difference in your life and save you a lot of time and money in the long run.

Learn more

If you have any questions regarding credit score you can contact our Finance Director, Zack Funkhouser (855) 367-9095 toll-free or email zackfunkhouser@lebanon-ford.com.

Charlie is a Digital Marketer and Web Designer who lives in Cincinnati, Ohio. He's a former car salesman and current employee at Lebanon Ford where he writes for our Ford-Life blog. Charlie is also a relative of the Owner, Marketing and Communications Director and MyTech Team manager. You can find Charlie on Facebook, Twitter (@charliecryder), LinkedIn and at charliecryder.com.